Revenue Guidance on improper transfers

There has been significant press coverage recently on transfers made to schemes such as the Brand New Carpet Company's pension scheme. It is alleged that individuals were encouraged to transfer their benefits from former employers' pension schemes to another scheme in order to take their benefits as cash from the receiving arrangement. The Inland Revenue has just issued an urgent Update (No.132) dealing with this kind of "trust busting". The Revenue says that such devices "frustrate the purpose for which Parliament has granted generous tax treatment" to approved schemes and they view this kind of abuse "extremely seriously".

The Revenue urges everyone to watch out for this and the Update names 3 people at the Revenue to whom concerns about transfer requests can be directed.

The Update says that by 1 July 2002 the Revenue intend to introduce a change of practice to require transferring trustees to ascertain the type of receiving scheme e.g. whether it is a SSAS (small self administered), large self administered or insured scheme. Depending on which kind of scheme is involved, different additional safeguards will need to be complied with. In the event of a suspect transfer request being made before July, the proposed changes of practice should be complied with now.

The need for care when making transfers out is emphasised by the fact that the Update says the Revenue may consider withdrawing approval from the transferring scheme if the circumstances warrant it. In addition, if an approved scheme knowingly makes a suspicious transfer payment, it may incur an obligation to deduct tax under the PAYE Regulations and interest and penalties may also be imposed.

To access a copy of Pensions Update 132 (which is not yet available in paper form), please click here

For further information please contact Mark Grant on +44(0)20 7367 2325 or by e-mail at [email protected].